Within technical analysis of stock exchanges, there exist and can be found in electronic tools for trading, in the specialized bibliography or in the network in general a multitude of mathematical indicators that can be represented graphically. At the stock exchange level, graphic representation acquires a key importance; it is not for nothing that the trading now carried out by an operator is backed up almost exclusively by graphs.
In spite of the wide variety of indicators and oscillators existing in the state of the art, they are all constructed on the basis of at most two gross variables of the market: price and volume. These indicators are based on the analysis of those variables by means of different alternatives which could be the stock price at the beginning and close of the session, the evolution of that stock over the course of the session, etc.
We can find an example of stock exchange analysis in the state of the art in the Accumulation/Distribution (A/D) line conceived by Marc Chaikin in order to deal with capturing the flow of money into and out of a stock as a prediction of the variation in the price.
For each period of fixed duration (5 min., 1 hour, 1 day, etc.) into which time is divided, Chaikin calculates the maximum, minimum and closing price. The relative position of the close with respect to the range formed by the maximum and minimum takes on a value of between 1 (close=maximum) and −1 (close=minimum) known as CLV (“Close Location Value”). If it is positive, the close is nearer to the maximum, it is considered that buys “beat” sells and the volume of the period contributes positively to the A/D line (buyer pressure). If it is negative, then it is nearer to the minimum and the volume contributes negatively (seller pressure). The A/D line is an accumulated series of “buyer” (positive) and “seller” (negative) volumes obtained by multiplying the accumulated series of volumes by the CLV series. There exists a variant of this oscillator (known simply as the Chaikin oscillator) which applies a MACD (Moving Average Convergence Divergence) to the A/D line. The aim of the MACD is to predict the variation of the series on which it is being applied, in this case that of A/D.
Another similar oscillator in the state of the art though predating that of Chaikin (Joe Granville 1963) is the OBV (On Balance Volume). It too uses the relative position of the close of the period but with respect to the close of the previous period. Once the oscillator has been constructed, it is used for obtaining buy or sell signals on the stock. A positive divergence between the stock and the oscillator, in other words, the oscillator has a positive tendency and price of the share a negative tendency, produces a buy signal.
Indeed, Chaikin type oscillators and others determine whether a contracted volume contributes to the buyer or seller pressure as a function of the evolution which the price has had. Nevertheless, they do not in any real way calculate the buyer or seller pressures in the market and they do not use a variable that would represent whether the transaction carried out has been initiated by a buy or a sell. They simply obtain an estimate affected by the variation, usually erratic, of the series of prices.
It would therefore be desirable to find a system and method of analysis and representation of the evolution of stocks that would clearly, concisely and directly represent the values associated with a transaction where the buyer and seller pressures especially are sampled.